There are fewer used cars on the market, forcing up prices. It's a delayed effect of the auto meltdown, which severely curtailed leasing in 2008. That means fewer cars are coming off lease and heading into the used car market.
Rising gas prices and the earthquake in Japan, which shuttered automotive production for weeks, are also playing a role. Dealers worried that about possible shortages from the Japanese automakers are stocking up on used fuel-efficient cars so they have something to sell later this summer.
The most startling effect is on the fuel-efficient Toyota Prius, which is worth $2,555 more today than it was when it was new a year ago, according to Kelley Blue Book, which tracks used car resale values.
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The National Automobile Dealers Association also tracks the data, and says other cars worth more now include the Volkswagen Jetta, which is now worth $747 more, the Nissan Cube, which is worth $842 more, and the Hyundai Tucson, which is valued at $635 more. The Honda Fit is worth $1,070 more, says NADA, than it was brand new last year.
Prices of used cars are supposed to go down every year. Unless it is a collector car, the older a car gets, the more its value depreciates. Some dealers say the NADA used-car valuation guide is slightly overpriced, but the numbers show a clear pattern of increasing prices.
American-made cars used to depreciate more quickly than many foreign brands for a variety of reasons – quality concerns, styling, and reputation, to name a few. A big factor was also Detroit's excessive use of fleet sales to rental firms, which the automakers used to prop up overall sales figures. Rental fleets would use the cars for a while, from several months to a year, and then re-sell the cars at auction. The oversupply of rental cars helped keep used car prices lower.
The same held true for leased vehicles as well: When drivers return a lease car back to the dealer, it either goes onto the used car lot or to an auction house where it is resold.
The combined effect automakers cutting back on fleet sales and the massive reduction in leasing in 2008 is cutting into used car supplies at auction.
Manheim, an auto auction company, says used car prices are at an all-time high. The company is auctioning off fewer cars, but prices have soared.
That's particularly true for fuel-efficient cars, which are seeing higher sales due to high gas prices. Manheim says prices on all compact and midsized cars are up 60% compared with six months ago. But large SUVs and pickup trucks are up just 5%.
But higher used-car prices may not last forever, says Alex Gutierrez, manager of vehicle valuation for Kelley Blue Book. Gas prices should start coming down mid summer, "and when they do, values for many of these fuel-efficient models are expected to drop," he says.
If you are in the market for a used car, tread carefully, because prices could crash later this year. But if you have a fuel thrifty hatchback such as a Honda Fit or Toyota Prius, and are in the market for an SUV, now is the right time to make that deal.